Saturday, November 12, 2005

John Curry and Dave Speas discuss school funding

"My only suggestion, that you touched on in your letter, is for all of us (retired and actives) is to put pressure on for increased funding and the elimination of charter schools. This is almost an impossible task with the current political atmosphere in this country. A massive "replacement" of many current legislators in Ohio and the U.S. will need to take place before this situation will change."

From John Curry

Dave, you touch upon a REAL problem. I also understand the problem of the local schools and their purses. We are in a pickle that isn't helped by our legislature's failure to supply adequate funding -- despite an Ohio Supreme Court order to do so. That is compounded with the current sad state of affairs not only on the state picture but also with our national deficit! I wish I had a magic wand to wave and all would be well.

My only suggestion, that you touched on in your letter, is for all of us (retired and actives) is to put pressure on for increased funding and the elimination of charter schools. This is almost an impossible task with the current political atmosphere in this country. A massive "replacement" of many current legislators in Ohio and the U.S. will need to take place before this situation will change.

On the good side, I think this movement is beginning throughout this country. The pendulum has begun to swing- the cause: the tremendous amount of human misery Buckeyes and Americans have suffered due to the pay to play and corporate mentality that has existed in our country and especially in Ohio. I will do what I can to help, but I only wish I had a solution.

From Dave Speas

John, We need to do a cost analysis for school districts. I am for this but I do sit on a school board in Clark County. My financial director and I have looked at the history of the cost of the 14% to our district.

In 94-95 it cost our district about $740,000 and in 04-05 it will cost us about $1,400,000. Since in the same ten year time period the state has just barely increased our share over the difference in percentage, we have cut $450,000 our of our budget this year and could only certify a one year raise for this school year for our teachers.

Unless the state gets more generous we are going to have to explain to our voters why we are asking for more money to be able to increase the teachers' share and our share of the increase instead of it going to the children. We need to know in some basic way how the increase in our share is going to prolong the healthcare service for our teachers retiring and what the total cost will be statewide at the current level and then added over the extended time.

Our board is not opposed to this plan but we are struggling with how we get the money to run our schools in 2007, fairly pay our staff, and do it on the backs of our tax payers who are going to ante up more money than they did last time we had a levy. I believe we need to get much more active in the movement to demand the state live up to the supreme court's finding that they need to find a fair way to fund schools, become outraged and work like crazy to get rid of charter schools not doing the job, and work against the legislators not complying with the finding by the judges. If we do not, the figures we see shows that 50% of the schools in this state will be in the red by 2009 and then up to 15% a year thereafter.

If boards are being asked to pay more, we should, as an organization be more active in the above movements. I would like your thoughts on this problem and how you see us solving it at the local level.

RHJones reports on the 11/10/05 STRS Health Care Discussion Meeting in Summit County

"The blame for this shortcoming in HC/Rx and CCOLA is ourselves. In the past we did not do a good selling job; therefore, we MUST do it now. Who knows? If we don't sell education here in Ohio, and across our great nation, America may, in 100-yrs, have rice paddies from sea to shining sea. Active or retired, we're teachers, we need to sell education until our last breath."

The meeting, hosted by STRS employees Mike Spino and Gary Russell, was held at the Sheraton West at 7:00 PM., having 60, or so, in the audience. This audience was a diverse mix of those just starting their teaching careers, those in the last 10 yrs. of teaching, and those of us retired teachers. Difficult questions came from all 3 groups. However, active teachers were underrepresented. It was noted that STRS Bd member, Constance Ramser was present -- Dr. Fluke, retired, and his wife, Nancy, an active, discussed the meeting with her afterwords.

My criticism was that there was a need for name tags; and, also, the STRS presentation needs to be in terms that a non-staff member can understand.

It appeared to me, that the fate of the STRS request of an increase in the employer/empoyee contribution rate will be a difficult sell and ALL actives and retired educators need to back STRS 110% in this most horrific fight. Without this increase we can expect very little in the future as to improvement to our HC/Rx. For both active & retired, in a few short years it is a possiblity that the HC/Rx may even become impossible for the STRS to maintain -- it may become extinct. Therefore, it is absolutely critical that we all sell the increase to all of Ohio's citizens.

We retirees thought that when we retired, we would be free from selling to the public increased investment into public education. Not so! If we think we can stop now; we are wrong to think this. TOGETHER, we must "think smart" to get this increase passed in the legislature! Let's do it! In their presentation, Mr. Spino and Mr. Russell and the STRS gained us the boost we needed to get moving forward on this extremely critical matter. For our well being now and in the future, this is a much needed increase in the employee/employer contribution to support a legislated HC/Rx offering.

For the benefit of all of us active/retired, I brought up the question of a Compounded COLA. I realize that this is not part of the HC/Rx package, but feel that if this increase frees up the STRS for HC/Rx monies, there could become a possibility for an opening to gain a CCOLA in the near future. With many of us retirees huddled around our thermostats set at 60 degrees this winter, in addition to the HC/Rx, we most sorely need the CCOLA.

The blame for this shortcoming in HC/Rx and CCOLA is ourselves. In the past we did not do a good selling job; therefore, we MUST do it now. Who knows? If we don't sell education here in Ohio, and across our great nation, America may, in 100-yrs, have rice paddies from sea to shining sea. Active or retired, we're teachers, we need to sell education until our last breath.

Kathie Bracy writes to Bill Leibensperger: Please don't patronize us

"When it dawned on us that neither organization was really representing us, there was no choice but to turn to our own resources and go after the wrongdoers at STRS ourselves."


Dear Mr. Leibensperger,

In reading your article "Advocating for You at STRS" in the current issue of Communiqué, I am particularly bothered by one of your comments:

"The stark contrast between these OEA members and too many of the usual participants in the public input portion of the [STRS Board] meeting (who have launched personal insults, unreasonable demands, and angry diatribes for the past couple of years) was a vivid one."

You give no indication of who the "participants" are (no doubt CORE members, most if not all of whom are members of OEA/OEA-R) nor do you list even ONE example of so-called "personal insults," "unreasonable demands" or "angry diatribes."

I have attended nearly every STRS Board meeting in the past year. While I have not made any speeches myself, I have heard many by people like myself, who have had legitimate concerns about management and spending practices that have occurred at STRS while the Board was dominated by OEA members who not only allowed these outrageous spending practices to occur, but boldly assisted in the actual spending of those millions of dollars of retiree funds.

I need to see your list of "unreasonable demands," as I have yet to hear any myself. All demands I have heard fall under the umbrella of ORC 3307.15, which mandates that the Board and other fiduciaries "discharge their duties solely in the interest of the participants and beneficiaries; for the exclusive purpose of providing benefits to the participants and defraying reasonable expenses of administering the system." Can you honestly say those five OEA members of the "old board" were doing this? Can you say that the OEA-dominated "old board" was not derelict in carrying out their duties?

As for the "angry diatribes," you did not mention what they were about or what may have precipitated them. How are readers supposed to know whether they were justified or not? You address your membership like sheep with your bold accusations, none of which you back up. We are not sheep, Mr. Leibensperger. We are OEA/OEA-R members, and have been most of our lives, and do not need to be patronized.

As you are well aware, many of us also belong to CORE, Concerned Ohio Retired Educators, a grass roots organization that evolved because a large segment of the STRS retiree population realized no leadership was being provided by OEA or ORTA after Dennis Leone investigated and exposed the numerous, outrageous practices that were going on at STRS, right under our noses. When OEA and ORTA failed to do the right thing by the retirees, admitting the wrongdoing and attacking it, they chose to overlook it entirely, in order to protect their own interests.

When it dawned on us that neither organization was really representing us, there was no choice but to turn to our own resources and go after the wrongdoers at STRS ourselves. Remember, we're talking about people (CORE members) who have been affiliated with OEA most of their lives, and ORTA in their retirement years; organizations we had placed our very TRUST in. CORE simply wanted to get the STRS mess cleaned up, then disband and go back to our other groups: OEA and ORTA. We would still like to see that happen, but unfortunately the chasm between us and both groups has widened so much in the intervening months/years since May, 2003, due to OEA and ORTA's persistent unwillingness to "come clean" that this is not going to be easy.

When people launch "angry diatribes," Mr. Leibensperger, there must be something behind it. You give no indication of such. If you ever taught in the classroom, you have experienced frustrated children who became angry children if nobody was listening to them and meeting their needs. Do you see a parallel here? CORE repeatedly took their concerns to the Board and were repeatedly blown off. CORE takes ONLY legitimate concerns to the Board; but with repeated rebuffs, how would you expect them to act? You blew us off in your own article by not explaining the "personal insults, unreasonable demands, and angry diatribes!" You are an educated man, Mr. Leibensperger; you should know better. Didn't your college require you to document everything you wrote in your term papers?

I find another part of your article very curious, where you say:

"Please make plans to attend or send representatives to future STRS Board meetings to provide either testimony or presence or both. I will help with the logistics of your participation and development of testimony."

Does this mean you will actually help teachers write their speeches? I find this incredulous! Don't you think teachers have the intelligence to write their own speeches? You are insulting them again! What does "logistics of your participation" mean? Are you going to send a limo to pick up these people and transport them to Columbus? As a matter of information, ALL CORE people have written ALL their speeches themselves, and have managed to get to Columbus on their own, at their own expense, from all over the state. Surely, you wouldn't expect other OEA/OEA-R members to do any less?

Well, I really don't expect to receive a reply from you. From my observations, the OEA leadership is slow to respond, if they respond at all, to issues from their membership that they are uncomfortable with. It is much easier for them to pick and choose whom and what topics they will address, and the manner in which they will address the chosen topics. With OEA's money, the leadership can put a spin on any issue they please, get it out to thousands and get away with it -- to a point. CORE is not going to go away any time soon, it appears, and our grass roots approach is getting the word out more and more every day on what is really going on in the 200 block of East Broad Street, Columbus.


Katherine B. Bracy
Life member of OEA-R, CEA-R, ORTA, NEA-R, Central OEA-R, AFM/AFL-CIO
Proud member of CORE

Friday, November 11, 2005

Grandfathering Those Affected: Curtis & Asbury, with thanks from John Bos

From John Bos
Nov. 11, 2005

Thank You Tom Curtis for a letter that speaks from the heart. It is amazing to me that we read about the issues of Medco, the issues with Caremark, the issues of the retirees and their dependents who were considered as "throw away trash" when the decisions about increased retirement and benefits were made by the former board. We have retirees that are splitting pills, making decisions about food, utilities, or medication and yet the STRS staff have minimal empathy for their suffering.

Thank you Tom Curtis, Thank You Nancy Hamant, Thank You Dave Speas, Thank You Dennis Leone, Thank You John Lazares for your caring and concern! Thank you to the many others that are working to improve and correct the errors of the previous STRS board.

It is no surprise that the staff medical coverage will be decided in a few weeks and our issues are on the table until February.


John Bos

From Damon Asbury:
November 08, 2005 3:33 PM


You ask some important questions about grandfathering. The Board has asked that this be made a topic for review and discussion at their February retreat. I will see that your questions are included in that discussion.


From Tom Curtis
Hello Dr. Asbury, Exec. Staff and Board Members,

Would you, the Executive Staff and the Board kindly address an issue with earnest, which has resulted in other retirees and me to become very active in the reform process at the STRS? The issue I speak of, is one of providing a "grandfathering" of health care benefits educators were told we would have for the rest of our lives, but then had revoked. This reform is greatly needed for obvious financial reasons.

As you are aware, those educators that initially established and/or supported the group known as C.O.R.E. did so, because they found their cost for their health care benefit increasing at an alarming rate. This increasing of health care costs continued to the point that on January 1st of 2004, the entire cost of health care for a non-teaching spouse, or one with less then 15 years of service, and dependent children, was placed totally upon the shoulders of the retiree. That decision resulted in roughly an 800% increase of cost to each effected retiree. That is simply outrageous! We were promised and deserved better from our fiduciaries. Simply being told that it was only a promise, not a guarantee, is unacceptable. I would most certainly feel that had you been placed in a similar situation, you would be actively involved in attempting to reverse or revise that plan.

To repeat, in 2004 the entire subsidy for all non-teaching spouses, or ones with less then 15 years of service, and all dependent children was removed, but had been provided before January 1st of 2004. There probably would be many more active with CORE, if they were physically able or were not out working to provide health care insurance they could afford for their spouse and dependent children.

Another issue arose due to this decision to eliminate spousal and dependent children subsidies. As many as twenty to thirty thousand or more healthy benefit recipients and their family members left our health care plan to find one for a much more reasonable cost. One they could afford. This resulted in creating a health care group of high incidence of usage, or ones with pre-existing conditions that would not permit them to be accepted by another carrier. I believe they refer to us as a "sick group". Obviously, the cost to provide coverage to such a group would be much higher, because the cost to maintain those left in that group is much higher, once you remove the healthy people.

I am sure these issues and many others were all discussed by our fiduciaries prior to making this change. This is a very sad scenario and in my opinion, one created by the STRS fiduciaries of that time. Many of those fiduciaries are still employed by the STRS. Most all STRS employees and their family members are today receiving health care benefits, which far exceed what any educator has ever received. I personally do not know an educator that received free dental care in the cost of their insurance while employed; yet our employees do.

Yes, health care costs have risen country wide, it is a national problem, but the STRS fiduciaries knew about that far in advance of it actually becoming a reality and did little to offset it. This can be acknowledged by reading past STRS Newsletters. The STRS fiduciaries knew about this in the early 90’s when they had to provide substantial amounts of revenue from the retirement fund into the HCSF to keep it solvent. Articles in the 1992 STRS Newsletters, numbers 78 & 79, indicate concerns were acknowledged and it was stated that a dedicated flow of income was needed to fund health care. In the 1992 STRS August Newsletter, #78, it states, "On the positive side, Grothaus (C. James Grothaus was the STRS Executive Director at that time) anticipates that the Retirement System will continue to find ways to provide meaningful and affordable health care coverage to retirees, even though health care costs continue to escalate at a pace greater than the inflation rate. He also believes STRS assets will grow at a pace similar to that experienced over the past decade." From my understanding, the assets grew far more then was experienced and yet sufficient contributions were never placed in the HCSF. Why not, Bob Slater?

It is now almost 2006 and the very same fiduciaries that were supposedly looking for that dedicated flow if income are still looking for it! What does that say for the very people that we have paid hundreds of thousands of dollars each year to manage our funds? Obviously, it does not show they were following the ORC 3307.15. Otherwise, our HCSF would be much larger and would still provide the benefit we were promised throughout our careers and when we retired.

Damon, you have questioned me before, when I have briefly discussed this issue with you, as to who promised us that benefit, as though that never occurred. That concern can certainly be documented by many of us and by literature printed and distributed by the STRS during our careers. I personally found it very alarming and uncaring on your part, that you even posed that type of question to me, considering the true spirit of the ORC 3307.15.

A "grandfathering" plan would provide us with the health care benefit we were promised throughout our careers and those near, or at retirement, by our STRS counselor. I would feel this would include all of those teachers that were unable to benefit from SB190. Meaning anyone that retired prior to 1999 and possibly as much as five years beyond.

SB190 provided educator‘s who continue working until they obtain 35 years of service a much higher pension benefit then those retiring with 35 or less years of service prior to 1999. Obviously, the increased pension benefit for those retiring after 1999 with more then 30 years of service would help pay for the increased cost of the spousal subsidy, which was totally removed in January of 2004.

The decision to revoke the subsidized benefit for those other then benefit recipients by the STRS executive staff and I believe supported by the Board, has placed our financial future in jeopardy. This is a consequence we were never made aware of by our STRS counselor, at or near the time of retirement. Further, it was something the STRS executive staff certainly was well aware of at that time and made no attempt to have their counselor’s advise us to consider such before retiring. We each reviewed the information provided by that counselor and then made a decision to retire based upon that information. Most of us definitely did plan for our financial future, it was the STRS fiduciaries that promised such, but failed to provide for it during all those years of extremely high yield returns on investments in the 90’s.

Please find this request to be of utmost importance for those retirees effected. I would ask that a study be completed to establish those that have been effected by that change in subsidy. I can understand and accept the need for the increase in cost to each benefit recipient, but let us place all of those involved on an equal playing field. I feel as many others I have spoken with, that we have been treated unfairly. Please remember that in June of 2003, which was the first time I spoke to the STRS board, I stated that I have the rest of my life to deal with this issue. I still feel that way and have shown that commitment for the past three years. I will continue to do so, as long as I feel I have an ability to see that change of spousal subsidy replaced for those educators who believed that would be the case.

If the STRS non-investment employees are successful in their suit in receiving their bonuses for doing little more then the job they were hired to do, which I believe was nothing more then a promise, then don’t you think those of us that were promised affordable health care could also be successful in obtaining such? Please let us all get our heads together and solve this issue very soon, before we too file a class action suit.


Thomas Curtis
1998 STRS Disability Recipient

Molly speaks out: AND: Harmony, Reality, and a Hand Extension

"We should not lump together -- in a negative way -- the local ORTA chapters who have supported and worked hard for the same things CORE has espoused, nor should we forget that 21,729 active teachers put John Lazares in office over Eugene Norris."

Nov 10, 2005
From Dennis Leone:

Good point, Molly, pertaining to the fact that REAL problem has been with the LEADERSHIP at both ORTA and OEA. We should not lump together -- in a negative way -- the local ORTA chapters who have supported and worked hard for the same things CORE has espoused, nor should we forget that 21,729 active teachers put John Lazares in office over Eugene Norris. The speakers we heard at the STRS Board meeting on Sept 15 were driven by the LEADERSHIP of OEA, pure and simple. There is no way that they all would be saying the same thing without being coached to do so.

"Let's work with membership who elected Leone so warmly and were dedicated to his election."

November 9, 2005
From Molly Janczyk:

No one is saying anything other than we need to be specific if we have a complaint to direct it to the particular officer(s) of OEA or ORTA. We MUST not use names of entire organzations when we KNOW the membership of OEA and ORTA delived us Lazares and Leone. Membership are upset that we keep hammering with the names ORTA and OEA when they feel THEY are ORTA and OEA and many do not agree with the 2 or 3 officials either.

It is stated that 2 remaining VOTING ORTA board members still preside. and some other exec comm members may agree with them or not as well as a very few rta officers . But the majority of mebership seems with us and fought for leone and I was told they are upset asking: WHO ARE THEY TALKING ABOUT? WE DELIVERED LEONE! ORTA IS MEMBERSHIP, the local RTA's , not a few remaining officials. Let's work with membership who elected Leone so warmly and were dedicated to his election. If we wish to criticize, name those we are specifically speaking about as, I was told so as not to offend membership. But to keep saying ORTA in genreal is offending many members who fought for Leone and work with us at the RTA's. I am ORTA lifetime and work for change within. Waiting for the change first is leting the others do this job. Others like Glenna Barr, and the many, many RTA's who worked so hard with us and Roger Pancake and hundreds of others who are ORTA AND CORE. So, to keep saying ORTA is misleading. It is not ORTA, but is some within ORTA and many of those are on their way out. We cannot condemn an entire 105,000 grp of people and that is how I am told many in the membership are interpreting our messages and I don't wish to do that. I named clearly who I wished to address and yes some others as well. Let's focus on the many hundreds and hundreds who wish cooperation instead of feeding a flame and angering them. If one wants to pursue the ORTA board members and some of Exec Comm. of 16 members and few RTA pres. and officials name them. I was told plainly we are angering the ones who helped and that is not necessary or appropriate because we oppose some.

Many of those who helped Leone want to hear from him in the ORTA qrterly newsletter. Should they be denied bec/ 3 board members which is now down to 2 opposed making a public statement? I think we should work on getting him published and heard by his constituency and MANY OR MOST OF THEM are ORTA members. It is not their fault. They did all they were asked and much more for DENNIS! They deserve to have their rep speak to them. Leone still travels far and wide to meet them. The newsletter is another way and I hope this issue will be revisited. I don't care what a few at downtown ORTA in Cols. do. It is the membership who matters and this is what they ask of us. i think it's fair. I don't wish to stay on a point that I feel harms us.

George Doyle's letter to Judge Reece

".....we teachers went beyond our jobs for years by being counselors, nurses, surrogate parents, psychologists, etc. in the classroom every day for many years and it was never even considered that we should receive bonuses for this. We did it because we considered it was part of our job as a teacher and a caring individual."


Dear Judge Reece:

It has come to my attention that you have made a decision allowing the payment of bonuses to STRS non-investment personnel for simply doing their jobs.

I would like to point out to you that we teachers went beyond our jobs for years by being counselors, nurses, surrogate parents, psychologists, etc. in the classroom every day for many years and it was never even considered that we should receive bonuses for this. We did it because we considered it was part of our job as a teacher and a caring individual.

When these personnel hired on, they knew what the salary would be and what their job responsibilities related to these jobs would be. Why, then, should they be given bonuses for simply doing what they were hired to do. Do you receive a bonus for doing your job as a judge? I'm sure that you go beyond what is required of you on a daily basis or you would not be in your position.

In addition to these bonuses, these personnel also receive supplemental childcare, which we retirees pay. No one ever gave us supplemental childcare while we were teaching; we paid our own way. No one supplemented our educational expenses, either, but these employees receive educational assistance, which we retirees pay. No one furnished our classroom with elaborate furniture or sculpture or a wall fountain. I feel that enough is enough! It is time that this injustice be rectified; and you can do your part by not allowing these bonuses. We retired teachers deserve this at the very least. After all, who do you think gave these people the knowledge and skills to do the very jobs they are doing? If it were not for we retired teachers, they wouldn't even know evough to get a judge involved, much less be able to read the legal documents involved!

I strongly urge you to reconsider your decision to give these people extra money for simply doing their jobs. Thank you for your consideration in this matter.


George V. Doyle, President
Allen County Retired Teachers Association
OEA-R Life Member
NWOEA-R Life Member
NEA-R Life Member

Thursday, November 10, 2005

Kathie Bracy's letter to Judge Reece

"We never received bonuses; we never sued anybody; and we just want to enjoy our remaining years with at least minimal comfort and necessary health care."

Dear Judge Reece,

I am an STRS retiree; I wish to implore you not to award one cent to the staff members who are suing STRS for bonuses (which were never in their contracts, and which many feel entitled to receive just for doing their job).

Please remember that some of the bonuses are nearly three times what some retirees' pensions are for an ENTIRE YEAR. Think about that for a minute. By the time these retirees pay for their medical expenses (thanks to the exorbitant increases in their health care costs) and their basic living expenses, many of them are having to go without, or choose among necessities such as food, medicine and orthopedic shoes. Some have been forced to sell their homes.

Are there any retirees in your family? Have any of them been faced with similar choices? Does it make you feel good to see this happen to people who have worked hard all their lives, only to commit the "sin" of growing older and having health problems that need to be dealt with on meager pensions at today's spiraling, out-of-control health care costs?

Remember -- every penny you award to those who are already making a comfortable salary, more than most of us ever earned, is money taken out of the pockets of retirees. Some will not eat as well; some will split pills, or quit taking them altogether; some will sell their homes. If it sounds like I'm pleading poverty on their behalf, a little homework on your part will show otherwise.

Judge Reece, I would sincerely like to see you become an advocate for retirees. If you have any compassion, if you have a conscience, if you want to do the right thing, you will reconsider your decision to award the noninvestment employees of STRS over $3 million in bonuses; you will award them nothing for their greed and entitlement attitude. And you will henceforth receive the gratitude of a poorly treated group in this state: the thousands of retired teachers who helped you and thousands like you get where you are today, on their meager salaries (and now pensions) and NO bonuses EVER, other than the quiet satisfaction of seeing their former students -- those such as you -- succeed.

I congratulate you on the high degree of success you have attained; I hope you will remember all those who helped you to get there -- including your former teachers. We never received bonuses; we never sued anybody; and we just want to enjoy our remaining years with at least minimal comfort and necessary health care. You can make a difference. I hope you will. Thank you.


Katherine B. Bracy


STRS vs. Medco: The trial begins; AP, Cincinnati Enquirer, Wall Street Journal

Trial of teacher retirement system suit begins

Associated Press

CINCINNATI - Attorneys for the state have told a jury that a pharmacy benefits management firm cheated retired Ohio teachers out of $152 million through overpriced drugs, excessive fees and withheld rebates.

A suit by the State Teachers Retirement System against former Merck & Co. subsidiary Medco Health Solutions is being heard in Hamilton County Common Pleas Court.

Medco is the nation's biggest manager of pharmaceutical benefits for employee groups, including Ohio state employees and four other state retiree groups.

The jury will have to decide if Medco violated state law in providing drugs to 115,000 retired teachers and 315,000 beneficiaries from 1993 through 2001. Medco says it did nothing wrong.

Mike Barrett, an attorney working for the state attorney general's office, said in opening arguments that Medco:

● Withheld $55.7 million in drug manufacturer rebates that were paid to Medco, but which belonged to the retirement system. Medco lawyer Earle Maiman said so-called "incentive" or "market share" rebates belonged to Medco.

● Charged $48.6 million in dispensing fees for mail-order drug purchases when the contract called for no fees. Medco denies tacking on any such fees.

● Overbilled the system $48 million by marking up mail-ordered generic drugs by an average 400 percent. Maiman said Medco lived up to contract prices.


And.... we FINALLY get some press from a Cincy newspaper - imagine that!!!

Isn't it about time for transparency into multi-million dollar contracts between state agencies and state affiliated agencies and Pharmacy Benefits Managers in the Buckeye State? Other states have it, why not Ohio???

"Maiman said Medco earned $6.9 million from the retirement system's business - a profit margin of 1 percent." -- If you believe that, I have a bridge I want to sell you!

-- John Curry

From The Cincinnati Enquirer:

"That sounded like a pretty good deal to us," Barrett said, "but then there was something they didn't tell us: It was justification for stealing money from us on the rebates."

Thursday, November 10, 2005

Trial begins against drug manager Teacher retirement system says it was defrauded

By James McNair
Enquirer staff writer

Opening arguments commenced Wednesday in a civil trial pitting the State Teachers Retirement System of Ohio against a pharmacy benefits management firm it accuses of cheating retirees out of $152 million through overpriced drugs, excessive fees and withheld rebates.

The case examining the business practices of former Merck & Co. subsidiary Medco Health Solutions is expected to last four to six weeks. Posting $35 billion in revenue in 2004, Franklin Lakes, N.J.-based Medco is the nation's biggest manager of pharmaceutical benefits for employee groups, including Ohio state employees and four other state retiree groups.

With possibly thousands of pages of contracts and other documents to sift through, the panel of eight regular jurors and three alternates will have its work cut out for it. It will have to decide if Medco violated state law in providing drugs to 115,000 retired teachers and 315,000 beneficiaries from 1993 through 2001. Medco says it did nothing wrong.

Mike Barrett of Barrett & Weber, arguing the case for Ohio Attorney General Jim Petro, said the fraud and contract breaches occurred in a number of ways. In the retired teachers' view, Medco:

◦ Withheld $55.7 million in drug manufacturer rebates that were paid to - and kept by - Medco, but which belonged to the retirement system. Medco lawyer Earle Maiman of Thompson Hine said so-called "incentive" or "market share" rebates belonged to Medco.

◦ Charged $48.6 million in dispensing fees for mail-order drug purchases when the contract called for no fees. Medco denies tacking on any such fees.

◦ Overbilled the system $48 million by marking up mail-ordered generic drugs by an average 400 percent. Maiman said Medco lived up to contract prices.

Barrett showed jurors a big chart of drug markups.

During one stretch, from 1996 through 2001, Medco billed the system $10 million for 284,000 generic prescriptions that cost $2 million, Barrett said. His chart showed markups of specific drugs, including a 2,200 percent markup for a generic motion sickness tablet called meclizine hydrochloride and a 300 percent markup for Benadryl.

"That's the kind of markups these guys were getting - and we weren't aware of it," Barrett said.

Merck bought Medco in 1993, then spun it off in 2003. Barrett said 17 percent of Medco's drug purchases came from Merck, including three of Medco's top 10 buys. He said the rebates paid to Medco by Merck and other drug makers were never passed along to the retirement system.

The mail-order dispensing fees, Barrett said, did not show up on invoices but were instead siphoned from the rebate pool at the rate of $8.30 per prescription. Dispensing fees were not supposed to be charged.

"That sounded like a pretty good deal to us," Barrett said, "but then there was something they didn't tell us: It was justification for stealing money from us on the rebates."

Maiman said Medco abided by contracts that were reviewed exhaustively by the retirement system's staff, lawyers and hired pharmacy-benefits consultants. He said Medco provides the same prescription service to other public employee retirement groups in Ohio "and none of them have sued Medco." He reminded jurors that the system put its pharmacy-benefits contract up for bids every three years - and, until 2002, kept going back to Medco.

"STRS bargained hard, and we entered into a deal that was fair to both sides. Medco delivered on its promises, and now these folks want more," Maiman said. "That's what this case boils down to."

Maiman said the system received many drug-purchase rebates, but incentive rebates based on volume sales were rightfully Medco's to keep. He flatly denied the allegation that Medco pocketed dispensing fees for mail-order purchases. And he said drug prices were based on a negotiable sticker price, less 17 percent for brand-name drugs, less 40 percent for generics.

"We haven't marked anything up," Maiman said. "They want you to imagine that Medco is sitting around in a room smoking cigars and jacking up prices. Malarkey! It doesn't happen."

Maiman said Medco earned $6.9 million from the retirement system's business - a profit margin of 1 percent.

Testimony begins next Monday in the Hamilton County Common Pleas courtroom of Judge David Davis. A document written by Petro's lead counsel, Stan Chesley, says the trial could result in the largest judgment in Hamilton County history.


From The Wall Street Journal:

Ohio Teachers' Suit vs. Medco
Offers a Peek at PBM Practices

"For years, pharmacy benefit managers, or PBMs, have battled the perception that they increase their clients' drug costs by charging big markups on drugs and by doing deals with drug makers to favor more expensive drugs. On Tuesday, a federal appeals court panel backed a Maine law that forces PBMs to disclose more information to clients about their deals with drug makers."

By Barbara Martinez
Staff Reporter of The Wall Street Journal
November 10, 2005

A lawsuit in a state court in Cincinnati is opening a window onto the business practices of pharmacy benefit managers, the companies that handle big employers' prescription drug benefits.

The Board of the State Teachers Retirement System of Ohio is suing one of the largest pharmacy benefit managers, Medco Health Solutions Inc., alleging that it overcharged retired Ohio teachers for prescription drugs. Among the allegations is a claim that Medco charged the teachers' retirement plan a 350% markup on generic drugs in 2000.

In a statement, Medco said the allegations are "false or wildly exaggerated" and that Medco actually saved the state millions of dollars. Medco added that it lost money in some areas of the contract and that its only profit was on generic drugs through the mail, where its profit margin was only 23%. Medco said its "entire profit margin" on the state's program was "less than 1% over about 10 years of service."

For years, pharmacy benefit managers, or PBMs, have battled the perception that they increase their clients' drug costs by charging big markups on drugs and by doing deals with drug makers to favor more expensive drugs. On Tuesday, a federal appeals court panel backed a Maine law that forces PBMs to disclose more information to clients about their deals with drug makers.

The companies have been sued by clients in the past over similar issues. The Ohio case, the first to go to trial, has implications for the entire PBM industry since the companies have similar business practices, and virtually any client could make the same claims. In a case expected to go to trial next year, the Justice Department sued Medco in 2003 alleging that the company defrauded the government's employee-benefits system. Medco has denied those charges.

The Ohio attorney general filed the teachers' suit against Medco in 2003 for "fleecing retired public school teachers who needed prescription drugs," according to the state's trial brief, which was filed Monday in the Court of Common Pleas in Hamilton County, Ohio.

The trial brief filed by Ohio offers a preview of documents and evidence the state will present to jurors. The State Teachers Retirement System of Ohio is currently providing health-care coverage to about 112,000 retired educators and their family members. The suit alleges Medco defrauded the system from 1981 to 2002. The state of Ohio is asking for $152 million in damages.

The lawsuit alleges that in 2000, Medco paid $2.3 million for generic drugs dispensed to retired teachers in Ohio, while it charged the state $10.5 million for those drugs. That alleged 350% markup was wider than in 1997, when the company paid $1.9 million for generic drugs and charged the state plan $7.2 million, a 280% markup.

The trial brief also discusses alleged deals that Medco made with drug manufacturers. It isn't known whether the practices disclosed in those documents are current.

According to Medco documents cited in the Ohio brief, Medco proposed to AstraZeneca PLC that the drug maker give it a 15% discount on its ulcer drug Prilosec "in exchange for a neutral position" when a generic version became available in 2002. The brief said the proposal was at odds with Medco's promise to move clients to generics as quickly as possible, and the discount wasn't passed on to Ohio.

Wednesday, November 09, 2005

Fleecing you and me: PBMs accused of driving up drug prices

Tues., Nov. 8, 2005

Experts: Pharmacy benefit companies can drive up drug prices

"I think the (pharmacy benefit management) industry has done a lot to increase the cost of drugs, and I challenge the PBM industry to say that isn't true" -- Gary Gustafson

Associated Press

BISMARCK, N.D. - Many companies that manage employee prescription drug benefit plans overcharge businesses for drugs, and may be responsible for escalating prices, say experts who advocate greater industry regulation and disclosure.

Pharmacy benefit managers have "enabled (drug) manufacturers to raise their prices more rapidly, and higher," said Gary Gustafson, an account manager for ClearScript, a pharmacy benefit manager that is part of Fairview Health Services of Minneapolis.

ClearScript is more open in its operations than the industry's biggest companies, Gustafson told members of the Legislature's interim Industry, Business and Labor Committee on Tuesday.

"I think the (pharmacy benefit management) industry has done a lot to increase the cost of drugs, and I challenge the PBM industry to say that isn't true," he said.

Spokesmen for Medco Health Solutions Inc. of Franklin Lakes, N.J., and Caremark Rx Inc. of Nashville, Tenn., said additional state regulation of the industry is not needed. Medco, Caremark and Express Scripts Inc. of Maryland Heights, Mo., are the nation's three largest pharmacy benefit managers.

A Federal Trade Commission report in September and a separate federal Government Accountability Office report published in January 2003 concluded that pharmacy benefit managers provide less expensive drugs to beneficiaries, said Peter Harty, a Medco vice president. The industry also has more than 50 companies, he said.

"Do you need more law? Do you need more regulation? The answer, from our point of view, is clearly 'No,'" Harty said. "The marketplace is working. We're saving money for employees, for employers, for health plans, and the marketplace has addressed the issues that need to be addressed."

Harty and Allen Horne, a Caremark Rx vice president, said forced disclosure of managers' rebate agreements with drug companies would prompt them to offer smaller discounts, which would mean costlier drugs for customers.

Harty said no other industry is required to disclose similar financial information, and compared the suggestion to requiring car dealers to openly post the details of every sale.

"If everybody knows the deal that the best PBM out there gets, those deals are going to dry up," he said.

Pushed by North Dakota pharmacists, the Legislature approved a new law this year requiring the state Insurance Department to license pharmacy benefit managers. It gives the department authority to audit PBM contracts.

The law also requested an interim legislative study of pharmacy benefit managers' operations, which the Industry, Business and Labor Committee will be doing over the next year.

Pharmacists had wanted a stronger measure, which would have required PBMs to disclose audits of their operations, and terms of their rebate agreements with drug manufacturers. Patricia Hill, director of the North Dakota Pharmacists Association, said it was patterned after a law the South Dakota Legislature approved last year.

Gustafson and Robert Garis, a Creighton University pharmacy professor and management consultant, said benefit managers should disclose more information about discounts and rebates they obtain from drug makers, and the reimbursements they pay to pharmacies.

Gustafson said ClearScript pays the same reimbursement to pharmacies and an employer's drug benefit plan for worker prescriptions, maintains a single pricing list for generic drugs, and discloses manufacturers' rebates to the companies it works for.

Other pharmacy benefit managers decline to share rebate information, keep dozens of different price lists for the same drugs, and charge companies more for an employee's prescription than they pay to the pharmacy that fills it, Gustafson said.

Harty said companies that hire pharmacy benefit managers negotiate contracts with them, and can insist on as much disclosure as they please while the contract is being drawn.

Imposing the same disclosure requirements on all companies would turn pharmacy benefit management into a commodity business, with companies unable to differentiate among themselves, he said.

The industry's biggest companies have been targets for a number of lawsuits, according to Securities and Exchange Commission disclosure filings. In the filings, the companies say they believe they are complying with state and federal laws.

New York Attorney General Eliot Spitzer sued Express Scripts in August 2004, claiming it inflated generic drug costs for the health plan that covers New York state workers, and kept drug manufacturer rebates that should have been paid to the plan. The case is pending.

The U.S. Department of Health and Human Services is investigating Medco for allegedly inflating drug prices charged to Medicare and Medicaid, the company says.

In April 2004, Medco agreed to pay $29.3 million to settle consumer protection allegations raised by 20 state attorneys general. The company did not concede any wrongdoing.

Paul Boyer's letter to Judge Reece

November 5, 2005

Judge Guy L. Reece, II
Franklin County Court of Common Pleas, General Division
369 S. High Street
Columbus, OH 43215-7A

Dear Honorable Judge Reece:

I am 80 years old, retired from school teaching since 1960 and a member of the Ohio State Teachers Retirement System. I am also one of five persons named as CORE of the CORE, Concerned Ohio Retired Educators because of my involvement in the group. We have been working for almost three years to straighten up the STRS after Dr. Dennis Leone, Superintendent, Chillicothe Public Schools, uncovered evidences of drastic misuse of our retirement funds by the then Executive Director and members of the board. I have also been chairman of a special CORE committee that has met with Dr. Asbury, Executive Director of STRS, on a monthly or bi-monthly basis to talk face to face about changes we felt were necessary.

Our first action was to force the resignation of Mr. Dyer, the fast spending Executive Director, who wrote in reply to a letter from a retiree, “You must realize that this money does not belong to Medicare or to you, but to the Board to spend as they see fit” (paraphrased). This is totally in conflict with the Ohio Revised Code for STRS.

One of the things we early on strongly objected to was the paying of bonuses to employees who were not actually buying and selling securities. They were all being paid huge salaries and then bonuses for simply performing their work. There was never any kind of a contract for them to be paid these bonuses and STRS Board decided at the end of 2003 not to pay the bonuses to these employees.

Since I retired in 1960, our free Health Care insurance is now costing me a great deal of money, we lost the 13th check, and our annual COLA is based on our original monthly benefit, not cumulative. Have any of us sued? No.

All of this leads me to wonder, Judge, how you could render the recent judgment which mandates payment of these bonuses and exorbitant legal fees of the plaintiffs. Please review and reconsider your decision.


Paul L. Boyer

Aetna: class action settlement info

From John Curry

Some have written and asked about information on the class action settlement with Aetna. This site will furnish you with the info. John

Harmony, Reality and a Hand Extension: A serious message from John Curry

"ORTA, like Allen (Gary), will have to extend their hand to Dennis first. How many times does one have to get kicked in the teeth before one says, 'Enough?'"

Amen, John. KBB

Harmony, Reality and a Hand Extension

I'm sorry, but the "why can't we just get along" well intentioned plea for CORE and ORTA to join hands and be one happy family is just not a realistic expectation at present. ORTA NEEDS to extend their hand FIRST to Dennis Leone and the thousands of STRS retirees they misrepresented by their failure to perceive problems at STRS BEFORE they became serious.

These "problems" were discovered and presented to the world when Dennis Leone (not ORTA) gave his 13 page presentation to the STRS Board in 2003. The majority of the current ORTA leadership (not membership) is in no way ready to extend this hand and won't in the near future. Their revolution from within is now in its infancy stage.

It will take years to accomplish this revolution with the governance structure that is currently in place at ORTA. Dave Speas has my utmost respect, but even Dave himself can not cause the hands of time to speed up. ORTA, like Allen (Gary), will have to extend their hand to Dennis first. How many times does one have to get kicked in the teeth before one says, "Enough?"

Had I become an ORTA life member, I would indeed be working in "the trenches" to reform an organization that is just now getting a grip on the reality of the sad situation at STRS. I chose not to join ORTA several years ago when I too became aware of what had really been going on at STRS and what hadn't at ORTA.

I will continue on with my efforts to reform STRS and I think that now ORTA will take steps in this direction. When, and if, they take the first step to extend their hand to Dennis -- I will then join them. That may be a while. Until then, I and ORTA will continue on our individual ways. We may have the same goals, but I choose to continue this battle without them.

The letter above is a summation of my own personal feelings and in no way represents an official CORE position.

Dropout Roulette: Has the "spiral" begun?

"Judi's letter has all the more meaning, doesn't it? Has the 'spiral' begun?" (John Curry, 11/09/05)

"My personal feeling is they used the healthcare money to make it look like they were increasing our investment returns (earnings) because they wanted us not to search so much. They had squeezed us all they thought they could so they eased off. That's why our healthcare went up 800% when AARP said it went up 35%." (Judi)

Date: Wednesday, September 14, 2005
Subject: Dropout Roulette-STRS?

From: Judi
To: Shirlee Zerkle ; Nancy B. Hamant ; Dennis Leone ; Mary Angeletti ; John Curry ; Tom Curtis ; George Doyle
Sent: Wednesday, September 14, 2005
Subject: Fwd: Dropout Roulette

This statement is from the current STRS website:

"This results in an insured pool of enrollees with higher medical costs. As a result, premiums have to increase at substantial rates over time to cover the lost premiums of healthy enrollees who leave the plan."


Date: Sat, 7 May 2005
Subject: Dropout Roulette

Dropout Roulette

When employers cap or cut retiree medical programs, the companies don't benefit just by spending less and reaping accounting gains. They also can benefit from a spiral of dropouts.

As retirees see their out-of-pocket costs rising, some of the healthier retirees quit the company program. Their good health lets them buy cheaper coverage elsewhere. But their departures concentrate the remaining pool with sicker people, costs go up, more dropouts ensue, and the pool gets more concentrated again, in what the industry sometimes calls a death spiral.

Each dropout reduces a company's immediate outlays, since it no longer has to pay even a capped benefit for that person. Dropouts also generate accounting gains for the company, since the concern gets to reverse the liability it had booked for covering those retirees for life.

A company in this situation -- with its own expenses capped -- has little incentive to negotiate the lowest possible prices with medical providers. In fact, it has an incentive not to: Rising expenses not only won't hurt the company but will tend to drive more retirees from the program.

At Sears Roebuck & Co., thousands of retirees have dropped out of a retiree health-benefit plan in recent years, at a time when retirees' share of costs was going up. While no one is saying Sears sought this dropout spiral, the dropouts follow a series of caps Sears established in the 1990s to limit its own expenses. The number of retirees taking part in its health plan has fallen 18% since 2000, to 51,500. Sears has 115,000 retirees in all. It can't say how many are eligible.

Sears says that while cost may prompt some retirees to drop out of the health plan, a more significant factor is that older retirees are dying and fewer people are eligible. Benefits Vice President Liz Rossman says Sears works hard to keep its plan affordable for retirees.

Sears has fed $383 million into earnings since 1997 from accounting gains that arose when the company capped its spending and retirees dropped the increasingly costly coverage.

In January, Sears announced it was further tightening the cap on its spending on retirees' health care, and also eliminating future retiree health benefits for most current employees. Sears says the steps will make it more competitive but declines to say how much they will generate in accounting gains.

What makes such moves different from other accounting quirks is that retirees end up paying the price. In Jeannette, Pa., in early January, about 100 retirees of GenCorp Inc., formerly called General Tire & Rubber, met in a union hall to discuss the latest rise in their health-care premiums.
The new cost of coverage for a couple was $568 a month. For most, this exceeded their company pensions. Because of the higher cost, many of the retirees at the meeting, whose ages hovered around 80, said they were dropping their employer's coverage.

Mabel Kramer began working at the company in 1944 making gas masks for World War II soldiers, and met her husband there. Now a widow, she collects a pension of $179 a month based on his 34 years with the company. Her GenCorp retiree medical benefits cost her $284 a month, consuming the pension and part of her $810 Social Security check. "If they raise it any more, I'll drop it," says Mrs. Kramer, 78. "It's enough to make you sick."

Others don't dare drop it. Edward Peksa, who spent 24 years in GenCorp's tennis-ball department, said he needs the coverage to help pay for five drugs his wife, Anna, takes for arthritis, hypertension and thyroid and cholesterol problems. The couple's premium more than erases his GenCorp pension of $320 a month. To make ends meet, Mr. Peksa, 75, works 30 hours a week as a greeter at Wal-Mart Stores.

These retirees were paying nothing for their health-care coverage until 2000, when the company began charging them. Their premiums have risen steadily since then. GenCorp says the reason is the ceilings it placed in 1995 and 1997 on its own spending on retirees' health care.

GenCorp's spending on the retiree health-care benefit has fallen over the past six years, its filings to the Securities and Exchange Commission show. It paid $30 million for the benefit in 1997 but just $25 million in 2003, according to its annual report. The liability on its books for retiree health care is down 40% since 1995.

Among the reasons is that no one hired since the mid-1990s will get the retiree benefit, GenCorp says. It adds that the liability also shrinks as retirees die or drop out of the health-care plan because they have "other options or coverage available, or possibly because they can't afford it any more."

And this:

How Cuts in Retiree Benefits Fatten Companies' Bottom Lines

Trimming a Health-Care Plan Creates Accounting Gains, Under Some Arcane Rules A Shield Against Rising Costs

March 16, 2004

The loud message comes from one company after another: Surging health-care costs for retired workers are creating a giant burden. So companies have been cutting health benefits for their retirees or requiring them to contribute more of the cost.

Time for a reality check: In fact, no matter how high health-care costs go, well over half of large American corporations face only limited impact from the increases when it comes to their retirees. They have established ceilings on how much they will ever spend per retiree for health care. If health costs go above the caps, it's the retiree, not the company, who's responsible.

Yet numerous companies are cutting retirees' health benefits anyway. One possible factor: When companies cut these benefits, they create instant income. This isn't just the savings that come from not spending as much. Rather, thanks to complex accounting rules, the very act of cutting retirees' future health-care benefits lets companies reduce a liability and generate an immediate accounting gain.

In some cases it flows straight to the bottom line. More often it sits on the books like a cookie jar, from which a company takes a piece each year that helps it meet its earnings targets.

The art of minimizing retiree-benefit costs while creating income is arcane and poorly understood by the public -- and by the retirees. Here's a field guide to seven techniques.

Hitting the Ceiling

Big companies began in the early 1990s to set ceilings on how much they would ever spend for retiree health care, regardless of what happened to medical costs in general. ConocoPhillips, Delta Air Lines and Coca-Cola Enterprises Inc. are among the many that did so. A cap can be a fixed annual amount per retiree, a per-retiree average or, less commonly, a fixed sum for a group.

In any case, once it's reached, a company is largely insulated from future medical-cost increases for those retirees.

The fate of retirees can be very different. When Robert Eggleston retired from International Business Machines Corp. 12 years ago, he was paying $40 a month toward health-care premiums for himself and his wife, LaRue, with IBM paying the rest. In 1993, IBM set ceilings on its own health-care spending for retirees. For those on Medicare, which provides basic hospital and doctor-visit coverage, the cap was $3,000 or $3,500, depending on when they retired. For those younger than 65, the cap was $7,000 or $7,500. Spending hit the caps for the older retirees in 2001, the company says, pushing future health-cost increases onto retirees' shoulders.

Mr. Eggleston, 66 years old, has seen his premiums jump more to $365 a month for the couple. Deductibles and copayments for drugs and doctor visits added $663 a month last year. "It just eats up all the pension," which is $850 a month, Mrs. Eggleston says. Her husband has brain cancer.

Though he gets free supplies of a tumor-fighting drug through a program for low-income families, he has cashed in his 401(k) account, and he and LaRue have taken out a second mortgage on their Lake Dallas, Texas, home.

IBM retirees as a group saw their health-care premiums rise nearly 29% in 2003, on the heels of a 67%-plus increase in 2002. For IBM, with its caps in place, spending on retiree health care declined nearly 5%, after a drop of 18% the year before.

IBM confirms that retirees' spending has risen as its own has fallen. It describes the retirees' increased cost in 2003 as not very dramatic, averaging $158 a year, or $13.15 a month, for each of the 190,000 retirees and dependents who participate in the plan. IBM says its costs are down because more retirees are older and eligible for Medicare, so the company's contribution is lower.
It says that this year it established a "zero premium" plan for retirees, although this plan carries deductibles double those of other plans.

This 2004 STRS made 15.5% on investments. This is in exceptionally bad times. What did they make in 2001-2003?

I requested this from Dave Speas:

From: Slater, Robert
To: David Speas
Sent: Saturday, May 07, 2005 12:19 PM
Subject: RE: Funding

Hi, Dave.

Total fund investment return for fiscal years 1995-2000 were as follows:

1995 – 17.23%

1996 – 12.67%

1997 – 17.42%

1998 – 14.55%

1999 – 12.74%

2000 – 10.44%

This is what STRS investment employees made in really good times. Something is wrong here. I think I'm right. Why weren't they making more in good times? My personal feeling is they used the healthcare money to make it look like they were increasing our investment returns (earnings) because they wanted us not to search so much. They had squeezed us all they thought they could so they eased off. That's why our healthcare went up 800% when AARP said it went up 35%. Check back over your notes.

Better check with Wilshire too.


Tuesday, November 08, 2005

Dr. Buser answers questions from retiree Judi

Assets and what affects them; bonuses

From: Stephen Buser
To: Molly Janczyk
Subject: Re: QUES:Damon, Steve
Date: Tue, 08 Nov 2005 08:20:15 -0500

STRS uses two measures of assets, depending on the purpose of the measurement. Market value is what we see in monthly reports from the investment staff. A smoothed version of market value (average over 4 years) is what the actuaries use in their annual reports on financial condition. Except for this distinction, the answers to your questions are the same for both measures of assets.

1) As long as sales of stock and sales of real estate take place at STRS estimates of market value, there is no added impact on assets as STRS measures assets. I.e. if a stock has gone up in value, or if real estate has gone up in value, that change in value is reported even if STRS has not yet sold the stock or real estate. Note that STRS is able to closely track the market value of most stocks it holds. However, like everyone else, STRS can only estimate the market value of real estate or alternative investments. Hence, when those sales occur, there will often be an adjustment to reported asset value.

2) As for the effect of the HC premiums STRS collects, that money helps offset part of the medical bills that STRS pays on behalf of members. Co-pays and other out of pocket expenses of members lower the total value of medical bills that are submitted to STRS. The total value of medical bills STRS pays on behalf of members is much larger than the HC premiums it collects. Nevertheless, the net cost would be larger yet if not for co-pays and out-of-pocket-payments by members. So if these items and/or HC premiums were to increase by more than the increase in STRS HC costs, there would be more money left in the equivalent of the STRS checking account ("cash account"). Unfortunately, the pattern has been going the other way. That is, despite increases in co-pays and out of pocket charges, the total value of remaining HC bills submitted to STRS has been growing by a larger dollar amount than the dollar increase in HC premium. Hence the net effect on the STRS checking account has been negative. (But the size of the negative effect is smaller that it would be without the increase you have identified. The STRS cash account is counted as part of total assets for STRS. Hence, the reduction in the total value of STRS assets due to HC is smaller (hence total assets are larger) whenever STRS cuts costs of any type, or increases HC premiums, or raises co-pays. or increases pout-of-pocket expenses.

Of course, when it comes to payments made on behalf of members, whether for pensions of HC, there is a net benefit of the expense in so far as providing such payments is the primary jog of STRS. It is simply a matter of balancing the expense, and value for one group of members, such as current retirees, against the financial interests of another group of members, such as actives who are worried about the financial security of their future pension and health care benefits.

3) As for the bonuses, if you are talking about the effect that the payment of bonuses has on asset values, they are like any other STRS expense. Payments are made out of the STRS cash account. Hence STRS assets are lower if bonuses are paid. However, under the current system, bonuses are only paid if there are even larger increases in the value of assets. Hence, despite the fact that the actual payment of bonuses decreases asset values, in theory at least, the incentive is for the investment staff to increase the value of assets through sound management, and the gain from such effort will be much larger than the amount of bonuses paid.

If you are asking, instead, if the savings from reductions in various types of expenses impact the amount of bonuses, I think the answer is generally no -- and certainly not the last couple of years. I do not know how bonuses for non investment staff were determined in earlier years. That was before my time and the practice has since ended. The current bonus program is limited to investment staff and is based on the performance of the particular assets they manage. If investment staff earn more money for the system than we would have expected based on the general increase (or decrease in financial markets), then STRS awards bonuses equal to a small part of the added value. However, if STRS increases assets by such measures as cutting costs or by increasing HC premiums, no added bonuses are awarded.

From: Judi
To: Molly Janczyk
Subject: Fwd: RE: Fwd: Judge Reece: STRS official impact statement re. bonus decision Date: Date: Mon, 7 Nov 2005

Please ask STRS. I'm on a friend's computer just briefly.

1. Does STRS sales or real estate as well as sales of stocks and incoming HC premiums and cuts in co-pays, and deductibles affect assets?

2. Are bonuses affected by these assets?

Dave Speas speaks out on unity

Bring us together

"If anyone can unite us, it is Dave Speas! And I BELIEVE HE CAN! He is doing it the right way by becoming part of the solution by promoting change within the structure. One day, ORTA will be US (the concerned membership changing the face of the organization) thanks to Dave Speas beginning this journey which can lead him to being ORTA President. More of us need be as committed as Dave in getting elected to open positions, working within their RTA's and thus bringing change. It is a time consuming endeavor but just as we changed the face of the STRS Board, we can change the face of ORTA Central. Many RTA's want unity and we need to work for collaboration of more. Thank you, DAVE! "-- Molly Janczyk

"I ask all retirees to join in the goal of finding common ground so we can all work together for us and all those who will retire in the future. A teacher's legacy should be putting teamwork in place to get the job done to better society. I believe we all worked to get our students to find a common place to live and work together. We should do the same now." -- Dave Speas

From Dave:

Uniting means outreached hands from all the players. I am not the only person who feels this way and we have to understand that no one really wants negative feelings about each other be it this problem or other players.

It is very important that all the organizations working for the betterment of retirees be able to work together on the issues. A fractured constituency for them cannot get the job done in a close and heated election, legislative change, or local issues like charter schools.

No group is made up of people who all believe in the same approach or which are the more important issues but in the end we all have to decide to work for what the majority decides. I am hopeful that in times of absolute disagreement we can agree to disagree but stay friends, as we all do in our daily lives, and work like crazy together for the betterment of retirees.

In the end, we will be turning our organizations over to others and they will have to work with what we leave them. It is my contention that teachers, of all people, should be able to find common ground so we can leave a network of organizations statewide that can make the positive things happen.

No organization, person, group, or leader should be bigger than the goal of uniting for the betterment of retirees. That is what I have felt from the beginning and will continue to work for until I no longer can do so.

I ask all retirees to join in the goal of finding common ground so we can all work together for us and all those who will retire in the future. A teacher's legacy should be putting teamwork in place to get the job done to better society. I believe we all worked to get our students to find a common place to live and work together. We should do the same now.


STRS health care discussion meetings continue around the state

Active teachers are STRONGLY urged to attend

This fall, STRS Ohio and the Health Care Advocates for STRS (HCA) launched a Member Education and Engagement Campaign.

The campaign has two goals:

* Educate STRS Ohio active members about the economic realities of health care costs

* Gauge support for a possible legislative initiative that increases member and employer contributions to provide an ongoing and dedicated revenue stream for the STRS Ohio Health Care Program for current and future retirees.

Right now, STRS Ohio is collecting the maximum it can from teachers and employers under current law (10% from members/14% from employers). To collect more, the State Teachers Retirement Board would need to go to the Ohio Legislature -- but before the board does this, it wants to be sure there is significant support from members.

Brochures have been mailed to all STRS active members and representatives from Health Care Advocates and STRS Ohio is hosting meetings around the state, with dates, locations and names of presenters as follows:

Tuesday, October 25
The Ohio University Inn
331 Richland Ave.
Athens OH
Mike Spino & Laura Ecklar

Wednesday, October 26
STRS Ohio Building
275 East Broad St.
Columbus OH
Ann Hanning & Sandy Knoesel

Thursday, October 27
Holiday Inn - Cincinnati Eastgate
4501 Eastgate Blvd.
Cincinnati, OH
Lisa Zellner & Laura Ecklar

Thursday, October 27
Shawnee State University
940 Second St.
Portsmouth OH
Lou DiOrio & Sandy Knoesel

Wednesday, November 2
Quality Inn & Suites Cleveland Airport
7230 Engle Road
Middleburg Heights/Cleveland OH
Lisa Zellner & Laura Ecklar

Thursday, November 3
Holiday Inn - Dayton North
2301 Wagoner-Ford Road
Dayton OH
Mike Spino & Gary Russell

Thursday, November 3
ORTA Board Meeting
Ann Hanning & Sandy Knoesel

Tuesday, November 8
Five Seasons Country Club
11790 Snider Road
Cincinnati OH
Larry Lewellen & Laura Ecklar

Tuesday, November 8
Holiday Inn - French Quarter
10630 Fremont Pike
Perrysburg OH
John Gaeth & Sandy Knoesel

Wednesday, November 9
Four Points by Sheraton Canton
4375 Metro Circle NW
Canton OH
Mike Spino & Terri Bierdeman

Thursday, November 10
Four Points by Sheraton Akron West
3150 Market St.
Akron OH
Mike Spino & Gary Russell

Tuesday, November 15
Holiday Inn
1920 Roschman Avenue
Lima OH
John Gaeth & Terri Bierdeman

Tuesday, November 15
Holiday Inn - Youngstown-South
7410 South Ave.
Boardman/Youngstown OH
Becca Ferguson & Laura Ecklar

Tuesday November 15
OCHER Board Meeting
Lou DiOrio & Sandy

Thursday, November 17
Holiday Inn - Beachwood
3750 Orange Place,
Beachwood/Cleveland OH
Tom Moody (?) & Terri Bierdeman

All meetings begin at 7 p.m. Due to limited seating, advance registration is required. Members can register using the STRS Ohio Web site ( or by calling toll-free 1-888-227-7877 (Member Services Center).

All STRS Ohio members are encouraged to voice their opinions by completing a survey at one of the Health Care Discussion meetings, responding to the online survey on the STRS Ohio Web site, or filling out the postage-paid survey card contained in the brochure.

More information is available at

Sunday, November 06, 2005

Board member Steve Buser on STRS escrow accounts, news releases and general perceptions

Does the judge also view STRS as a fat piggy bank with $60 billion in free money? Sure hope he's not reading tabloids!

From: Stephen Buser
To: Molly Janczyk
Subject: Re: FW: STRS official impact statement re. bonus decision
Date: Sun, 06 Nov 2005

Dear Molly:

I have not double checked and thus do not want to pretend to have precise answers for any particular case. However, my general understanding regarding such matters in a typical case is as follows:

1) When STRS puts money into an escrow account, the money comes from a general operating account STRS uses for all of its collections and expenses. Thus, as you have surmised, if money had not been place in an escrow account, it would count toward general STRS assets. In a similar manner, my understanding is that whenever STRS collects money from successfully suing others, such as Enron, that money goes into the STRS general account and is credited to STRS assets.

2) I also think you are also correct when you note that money in an escrow account typically earns interest. If STRS wins a corresponding law case, the interest as well as the principal comes back to STRS. However, if STRS loses a claim, a judgment will often include an award of interest. The amount of interest in an award might or might not precisely equal the amount of interest earned money in the escrow account. Any difference would go into, or come out of, the general STRS account.

3) I am not sure if we are on the same page when it comes to news releases -- but I think we might be. In one article I noted a statement to the effect that a payment in a particular law suit would not have a material effect on the financial condition of STRS. That statement also rubbed me the wrong way. However, my understanding is that the particular language in question is standard accounting jargon and means that, for a system that measures assets and liabilities in billions, any change involving millions will show up as rounding error when the amounts are expressed in billions. Nevertheless, as Everett Dirksen used to say about the Federal Budget, a billion here, a billion there, and before you know it you're talking real money. I hope you understand that no one on the Board regards the amounts in question as insignificant even they do not affect things like the STRS credit rating.

As for the Judge you mentioned, I do not know him and do not know what he might think. However, I worry that based on what I have been reading in the popular press, some people seem to think that STRS is just a Piggy Bank with $60 billion in free money. I rarely hear anyone say that the $60 billion is only 75% of the total amount school districts owe for pension benefits earned by current retirees plus credits toward future pensions that actives have earned to date. Under authority of the legislature, STRS has supported school districts by not requiring them to fully fund pension obligations as they accrue. Nevertheless, unless STRS is repaid for its past generosity, there will come a time when STRS funding is not able to cover monthly pension checks.

The same articles sometimes talk about how "rich" the STRS system because it collects 10% from actives plus another 14% from employers. They do not mention that the employee 10%, plus 5% of the employer contribution is required to pay the cost of adding one more year to the pension credit of active teachers. That leaves only 9% of the employer contribution to pay down the obligation of school districts to make good on their continuing unfunded pension liabilities.

To the extent possible, STRS is authorized by the State to use part of the employer contribution to help pay health care bills of retirees. Under present policy, STRS uses 1% of the 9% additional contribution from employers. That amounts to roughly $100 million per year. While that might seem like a lot, health care bills for retirees in the health care system total more than $500 million per year, and the amount is growing a double digit rates each year.

As you know, STRS has raised retiree premiums for health care by extraordinary amounts. STRS has also imposed sharp cuts in operating expenses. Those cuts might not be as deep as some would wish. However, STRS just got a ruling from the Judge that one budget cutting measure was too severe. Moreover, while STRS continues to look for ways to cut costs, the entire operating budget is far less than $100 million, and thus offers only modest hope of impacting the health care funding gap to a significant degree.

In sum, I simply do not see how anyone can look at the raw numbers, health care costs of $500 million per year versus employer contribution toward health care of only $100 million per year, and not agree that additional money is urgently needed. Unfortunately, I do not see these numbers showing up in the discussion of how "rich" STRS is and how pampered our members are.

So to get back to your question about what the Judge might think. I fear he might be reading the same things I have been reading and not have a complete picture either about pension funding for STRS or about health care costs for STRS.


At 12:49 AM 11/06/2005, you wrote: The interest bearing account that was started when litigation began:

QUES: 1. WHERE DID THE MONEY COME FROM TO START THE ACCOUNT? 2. If the money had not been used to start this account, wouldn't that money be earning interest for us instead of litigation?

If the answer is it came from pension funds or interest on pension funds then it and the interest, does have impact though it may be very small. But, it wasn't donated money for this use, was it? The total truth should be given is all I am saying. It seems misleading otherwise, if in fact this fund was in any way generated by contributions or interest on them.

I wonder how thoroughly Judge Reece was informed of the retiree perspective on this matter. It would seem he was provided little opportunity to hear from the membership and since it involves us, why were we not included in the proceedings to give the other side. Retirees were unfairly burdened with costs impossible to meet without severe hardship and or reemployment for those able. Retirements were stolen and retirees were forced to save HC for now.

Let those who are ill and have to work after being promised HC second to none in STRS literature and consultants telling us we'd never have to worry about HC testify if STRS and Petro are serious about fairness. Petro should be happy to bring this about since he has publicly stated he will carry out his fight against these bonuses though he recommended partial settlement below. Seems a conflict. Is money to staff more important than relief to needy retirees whose finances have been depleted, homes sold, treatments and RX's refused due to cost? Staff should get PUNITIVE DAMAGES? What about those who are the true victims? Retirees. Did STRS as guardian of our money bring forward our needy, our ill, our handicapped , our back to work to pay for HC retirees and families? Seems only one side was heard and once again, retirees, ignored. This is what STRS found reasonable? This follows ORC:3307.15.

Seems anyone who voted yes should have taken more time to hear the other side before deciding though a few of them have no understanding of a world below their lifestyle or mentality.

WHY were we not included in these proceedings?

Janczyk and Curry: words to Judge Reece; child-care center; Kostyu on bonuses; ORC 3307.15

PLAYGROUND. The State Teachers Retirement System headquarters in Columbus includes a child-care center (center) for employees' children. The director of the center, Jodi L. Wells, earned a bonus in part for maintaining "open communication between parents and staff."

From: Molly Janczyk
To: Guy Reece, John Curry
Sent: Sunday, November 06, 2005
Subject: VOTERS ASK: YOUR HONOR: Have you considered this info; Curry letter follows

Judge Reece, Would you be agreeable to workers at your pension system receiving bonuses for simply doing their jobs? STRS felt it had millions of our dollars to be plentiful and easy with it during the market ride and implied an endless bounty to its staff. Does that make it right and if implied promises made with NO cntractual responsibility made, should they be honored when they should never have been made in the first place? Was it the workers' fault? Perhaps not. WAS IT RETIREES' FAULT? MOST CERTAINLY NOT! It is STRS membership contributions and earnings and should never have been promised away for merely doing one's job.

We are the victims; not the staff. They are paid with our money given away with no thought of membership who was forced to save the system with untendable HC increases.

Remember we are the voting public and far outnumbered a handful of STRS staff. We have been devastated and our only recourse for change is to change those who continue to harm us just as we changed the faces of the STRS board in only 2 years overturning incumbants and electing those who represent membership-not staff following ORC:3307.15.

We have achieved pension reform with SB133 which we lobbied hard to enact with language to remove any future board offenders and prohibiting past offenders from ever sitting on the board again due to overspending.

We have forced the arrogant past Exec. Direc. Dyer's removal obtaining the letter on which he wrote back to a retiree that STRS money was theirs to spend as they wish.

We have met with STRS monthly in small committee meetings and with the help of eliciting media and legislators forced changes in spending at STRS resulting in reductions of staff and bonuses and eliminations of credit cards, cars, parties, cutbacks in travel and airfares, subsidies for cafeteria and fitness and lowered subsidies for childcare which is still a sore point for educators who had to pay for their own childcare and expected to pay for STRS staff as well UNKNOWN to us until the past few years.

We promise to remember those who force STRS to follow the ORC:3307.15: to act solely on behalf on membership and beneficiaries. Paying bonuses for doing one's job wrongly promised in any manner THOUGH WITHOUT ANY CONTRACT is against this code and harms membership as it is membership money and membership who is suffering. If I promised YOUR money or its earnings to others for doing their job, WOULD YOU ORDER IT PAID even tough I had no right to do so? This money should be ordered to be used for needy retirees who cannot afford housing or medical treatments and RX's vs. overpaying staff for merely doing their jobs.

Molly Janczyk

From: John Curry

To: Guy Reece
Subject: Your Honor, have you considered this information re. STRS bonuses? (letter follows article)
Date: Sun, 6 Nov 2005

Controversy surrounds STRS's awarding of bonuses

Repository / Stan Myers

PLAYGROUND (photo above). The State Teachers Retirement System headquarters in Columbus includes a child-care center (center) for employees' children. The director of the center, Jodi L. Wells, earned a bonus in part for maintaining "open communication between parents and staff."


Copley Columbus Bureau chief
July 13, 2003

COLUMBUS - The people who run the pension system for Ohio's teachers got millions in bonuses for attending workshops, talking to parents and keeping spreadsheets of expenses.

The bonuses are just one of the controversies swirling around spending by the State Teachers Retirement System. Critics blast the payments as an example of excessive spending. The system paid nearly $19 million in bonuses to its investment and non-investment staff from 2000 to 2003. During that same period, health care costs for retired teachers skyrocketed, and the pension fund's portfolio plummeted.

By comparison, the larger Ohio Public Employees Retirement System gives only its investment staff bonuses, and those bonuses totaled just $2.06 million from 2000 through 2002.

The controversy about the teachers system's spending has led nearly 80 percent of Ohio lawmakers and Ohio Auditor Betty Montgomery to call for Executive Director Herbert Dyer to resign. The system's board met for nearly five hours behind closed doors Thursday to talk about "staff performance, compensation and other terms and conditions of employment;" many think the discussion focused on the terms under which Dyer will leave.

Meanwhile, the teachers pension board has temporarily suspended all bonuses as it reconsiders its policy.

Documents from the last full year for which bonuses were paid - the fiscal year that ended in June 2002 - showed at least 42 supervisors reached 100 percent of their bonus goals. Records for another eight employees did not make it clear if goals were met.

Of the 15 who did not meet all their goals, 10 were in the 90 to 96 percent range. For example, Damon Asbury, deputy executive director of administration, reached 96 percent of his goals and got a $49,728 bonus. That was on top of his $148,000 salary.

Shun Koizumi, supervisor of the copy center, was the least successful at reaching planned goals, 60 percent, but that was good enough for a $1,367 bonus tacked onto a $45,580 salary.

According to retirement system officials, the performance-based incentive program was set up so organizational goals could be achieved cost effectively.

"The goals are to expand beyond the associate's regular assignments, representing additional initiatives and increased workload outside the normal scope of responsibility," says one document.
Each employee develops and assigns a weight to his or her own goals. They're approved by the employee's immediate supervisor, the deputy executive director overseeing that department and Dyer.

At the end of the year, the employee reports whether he or she met the goals and by what percentage. That assessment is approved by the same three officers.

Teachers retirement system officials say the program is one reason member satisfaction with their pension system exceeds 95 percent.

What are some of the bonus goals that were above regular assignments and workload?

● Fifteen percent of Jodi L. Wells' goals as director of the system's child care center was to "continue to maintain open communication between parents and staff."

She also was supposed to "stay abreast of latest research dealing with the Information Technology field as it relates to children's use." In other words, she read about Internet filters and talked to parents and staff about them.

Wells also was to "maintain awareness of budget and continue to explore options to increase efficiency." To reach that goal, she created spreadsheets and monitored monthly spending.
All told, Wells achieved 93.8 percent of her goals and got an $8,639 bonus on top of her $61,400 salary.

● Carol Hamilton, supervisor of food services, achieved 100 percent of her goals in 2001-2002 and received a $1,965 bonus. Her goals for 2002-2003 were nearly identical. For example, in both years, four of her six goals were maintaining her dietary manager's certification, performing employee safety training, assuring technical training for the food service staff, and making sure the staff was certified.

● To help earn his $13,462 bonus as the supervisor of business systems analysis, David Donithen participated in "a minimum of three formal activities to enhance technology and/or investments related knowledge." In doing so, he met 20 percent of his incentives for the 2001-2002 fiscal year.
For the fiscal year that ended June 30, Donithen proposed going to two formal activities, counting toward 15 percent of his bonus.

Not reaching the goals has no effect on regular salaries or cost-of-living raises that supervisory staff receive.

According to the system's spokeswoman, Laura Ecklar, any employee who gets a negative annual review or a "needs improvement" notation is not eligible for a bonus.

The number of non-investment employees eligible for bonuses increased from 46 in 2000 to 66 this year.

Retirement system officials and their consultants defended the incentive plan to the Ohio Retirement Study Council last week.

Lawmakers questioned why the STRS bonuses are "so vastly different" than those at the state's four other pension funds.

Deborah Scott, chairwoman of the teachers' board, said the program is based on the advice of consultants, Dyer and staff, who said the bonuses generally follow those at similarly sized pension funds in other states.

But council Chairman Sen. Lynn Wachtmann, R-Napoleon, called the bonuses "extraordinary" and said he was "extremely upset" by "a lot of misjudgment."

"Help me out here," said Rep. John Boccieri, D-New Middletown, addressing Peter Gundy with Buck Consultants, who was hired by the pension fund. "How do you justify bonuses for the copy center supervisor, the day care director and the maintenance supervisor?"

Gundy said his firm did not address incentives for those positions when it advised the board.
Boccieri asked if his firm consulted the retirement system members about the bonus policy.

"No," Gundy responded.

You can reach Copley Columbus Bureau chief Paul E. Kostyu at (614) 222-8901 or e-mail:

John writes:

Judge Reece, the real pain and suffering has and is being experienced by over 100,000 STRS retirees who have now resulted to skipping medications and pill-splitting so as to be able to continue on with their lives and maintain health care insurance which has increased over 600% for this retiree and his spouse - it is now $671 per month for this retiree who spent 30 years educating Ohio's youth. Had I educated Ohio's youth under the your retirement system (OPERS) , this coverage would be a total of $80 per month ($0 for myself and $80 for my spouse).

Mismangement, misspending, bonuses, and an entitlement philosophy by those formerly in leadership roles at STRS has contributed to current retirees' miseries - additional compensation awarded to plaintiffs would only make this situation worse for current and future retirees.
The ORC section 3307.15 (copied below) dictates that STRS funds be used solely in the interest of the participants and beneficiaries of STRS. I ask you to consider this information before granting any additional monitary compensation to the plaintiffs involved in the class action suit against the STRS of Ohio. Thank you for your consideration.

John Curry -- an STRS retiree who educated Ohio's youth for 30 years without a bonus (ORC 3307.15 listed below)

ORC 3307.15. Investment and fiduciary duties of board:

(A) The members of the state teachers retirement board shall be the trustees of the funds created by section 3307.14 of the Revised Code. The board shall have full power to invest the funds. The board and other fiduciaries shall discharge their duties with respect to the funds solely in the interest of the participants and beneficiaries; for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of administering the system; with care, skill, prudence, and diligence under the circumstances then prevailing that a prudent person acting in a like capacity and familiar with these matters would use in the conduct of an enterprise of a like character and with like aims; and by diversifying the investments of the system so as to minimize the risk of large losses, unless under the circumstances it is clearly prudent not to do so.

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